A long-time client sent us a tip on a terrific new book by Richard Florida, “Who’s Your City?”  For fans of economic theory and real estate (and who isn’t?) it’s an interesting read.

As noted by Carol Lloyd in the San Francisco Chronicle, the book explains in a very rational manner why Bay area home prices are far more stable than the national average. And of course, that has implications for Marin County real estate as well.

Is it the cappuccino? The cabernet? The politics?  None of the above, although they all help. Florida demonstrates that the Bay area is a center of economic innovation – as measured by the number of patents filed, the number of “star scientists” that reside here,  and the concentration of  big universities. Other measures such as health, education, culture, and safety add to the allure.

The result is that Florida believes the Bay Area, like other “superstar regions”, will go up and down in real estate values, but is far more resilient than other areas in the country.

Regarding real estate investment, here’s what he told Lloyd: “If I had to give advice, I would say to buy single-family homes closer to the core, not in the outlying areas where the more affordable housing is. The really knowledge-driven people have to be more effective, so they have to use their time more efficiently, so center locations have become more valuable.”

Hmmm…..sounds an awful lot like Marin County, doesn’t it?

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Yes, the Chronicle says we’re in the midst of a giant downturn. The IJ says home sales plummet in January (they did).

Someone forgot tell home buyers in Corte Madera. Real estate sales have picked up quite a bit here. For example, 247 Sausalito, asking $799,000:

Four offers, after 10 days, according to the Selling agent. Now in contract.

And 438 Oakdale, also Corte Madera, $850,000:

Four offers, five days, now in contract.

And 4 Wildflower Court? Asking $1,089,000.

Four days, two offers, now in in contract.

And then 215 Chapman just closed at $875,000 - there were five offers on that, asking was $799,000!

What’s going on?

First, they were all well-priced. Second, three were in Chapman Park, one in Madera del Presidio, both highly desirable neighborhoods in town. Finally smart buyers know that this is a good time to buy - we haven’t had a market this good for buyers in a very long time.

Combine that with some realism on the part of Sellers - and you get action. More about some great deals coming soon….

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That’s  a decision every buyer needs to make on their own.

I heard a great quote the other day:

“The time to buy is when there is blood in the streets. Not when everyone else is buying, when you’re fighting with five other offers to get accepted. It’s when nobody else is doing it.”

There’s plenty of blood out there right now, lots of deals are emerging too.

For example, there are a bunch of condos for sale right now in Southern and Central Marin, as well as some TICs, that make better sense as investments than anything we’ve seen in a long time. Prices have held steady, or even declined in some cases, and rents have risen. The result? You could be breaking even at 30% down, which was unheard of on anything in Marin County a few years ago.

And even if appreciation is ONE HALF of the historical rate of the last 41 years,  that $400,000 condo is worth $600,000 in ten years.

Can your stocks do that? And deliver income along the way?

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The Fed’s surprise rate cut last week of .75 points won’t affect mortgage rates, at least in the short term. But it will be a big net positive for the market.

There will be three big effects on consumers that will positively affect house-buying activity.

1. Home Equity Loans. If you have one and it’s linked to prime, you’re monthly payment just went down substantially. All those 100% finance deals a few years ago? Well, 20% of that is probably a home equity line, and everyone just got a break.

2. Adjustable rate mortgages. Again, many of these are indexed to LIBOR, which is linked to this rate. So anyone with an adjustable indexed to this rate just got a huge break on what the adjusted rate will be. Our in-house mortgage broker estimated it could be of a magnitude of two interest rate points. That’s huge - it means more people will be able to hang on, and won’t end up in foreclosure.

3. Credit card debt. Anyone not paying off the balance every month will now pay less on a monthly basis.

All in all, the net positives here are potentially very large. Combined with the lowest interest rates since 2004 for mortgages,  it would be surprising not to see the market heat up a bit soon.

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The latest foreclosure news from Data Quick is up - the Marin IJ story ran yesterday.  And the San Francisco Chronicle did also. 

The news is not good. But it’s not nearly as bad as the headlines.

First, some perspective. There were 40 foreclosures in Marin in the fourth quarter, according to the IJ. There were also 486 sales, according to MLS. In Contra Costa, for the same time frame, there were 1,558 foreclosures, and 1,559 homes sold, according to the Chronicle article. In other words, there were as many foreclosures as there were homes sold.

So for openers, Marin County is much better than other parts of the state. Of course, if the patient is near death, that may not be saying much.

But in absolute terms, the number is small. Will it increase? Probably. Mortgages are going to continue to re-set through this year, and that is going to create more foreclosures.

I don’t want to make light of this. In my last post I talked about low offers, and said in one case I would have counseled the Seller to counter back way over asking price. (That’s one way to find out people are reading your blog by the way, lots of feedback on that). Foreclosures create massive pain, emotional and financial, for everyone.

But it’s not a panic situation in the least. In fact, homes are selling, on average, at slightly over 96% of list price. Is pricing lower? In many markets, yes.  But are Sellers jumping on offers at 80% of list price? Not from what we’ve seen among our listings and buyers, and not according to the MLS data.

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